UK defence company has BAE Systems has reported an 8% increase in annual earnings, in line with forecasts. The firm put the improved earnings numbers largely down to growing demand for its advanced precision kill weapon rockets.
Sales increased by £0.6bn to £19.6bn largely reflecting currency translation and underlying earnings per share increased by 8% to 43.5p.
Operating business cash flow increased by £748m to £1,752m and net debt reduced by £790m compared with 31 December 2016.
BAE said its guidance for flat earnings this year reflected organisational changes plus the adoption of a new accounting standard.
The guidance is a slight downgrade to expectations as analysts had been expecting earnings to grow around 2 % in 2018.
The latest downgrade may go some way to explaining the fall in share price – in mid-morning trading the stock was down 3.36% to 581.40.
The sell-off did not deter some brokers from seeing good investment opportunities in BAE. Beaufort Securities reiterated its “Buy” rating for BAE, pointing to a solid order backlog and an encouraging global economic trend with higher oil prices as indicators for positive momentum going forward.
The broker added that an “improving outlook” for defence budgets in a number of BAE’s markets was also a “good upside”.
Year of change
It has been a challenging year for the company with a number of organisational changes as well as 2,000 job cuts to tackle lower production of the Eurofighter Typhoon jet.
Despite the flat earnings guidance, BAE remains positive over the longer-term. The company lifted its dividend for the full-year by 2% to 21.8pence, and CEO Charles Woodburn insisted the outlook for returns was positive.
“With an improving outlook for defence budgets in a number of our markets, we are well placed to generate good returns for shareholders,” he said in a statement to the stock market.